COVID-19 has cost one major SC city $20 million. How it’s fighting to make it up

The city of Greenville has dipped into its reserves to make up a $20 million shortfall due to the crippling effect of COVID-19 on the hospitality, restaurant and other travel industries.

John McDonough, Greenville’s city manager, said the decline in tax revenue has caused the reserve fund to decrease to about $20 million.

Greenville is like hundreds of cities and towns across the nation struggling with decreased revenue in the throes of a pandemic. Regularly, Greenville County has been one of the hardest hit areas in the state with COVID-19 infections.

McDonough said the financial pressures could have been worse. Most of the city’s revenue comes from property taxes, which were largely collected by the time the pandemic hit earlier this year.

Also, the city was in the midst of budgeting for 2020-2021 when the pandemic began. Cases continued to increase, forcing businesses to close. That left the city able to re-forecast revenue, adjust personnel and put off some capital expenditures.

McDonough said the pandemic has also given leaders in mid-sized cities across the country the opportunity to recruit highly skilled workers who want out of big cities.

“Once this is over, people are going to move, and Greenville is one of the cities people are looking at,” McDonough said.

Revenue decreases

About 45% of the city’s revenue comes from taxes assessed on restaurants and hotels, collections from parking lots and rental of the TD Convention Center, a sprawling facility usually used for large events such as dog shows and trade events. Most organizations have put off their events until next spring or fall.

Patrons of the Greenville Zoo usually chip in about $3 million to the city’s coffers, but with a closure and fewer visitors, the zoo will likely bring in $2 million or so.

Both the convention center and zoo required an infusion of cash to keep them going, McDonough said.

The hospitality tax was the biggest revenue stream to decrease, which in 2018-2019 was $11.8 million assessed on restaurant sales. Greenville expected to bring in $12.1 million in 2019-2020, but by June with all restaurants shut down for almost two months, the city received $10.4 million. That caused city leaders to retreat to budget $7.6 million for the current fiscal year. McDonough said he’s hopeful they can get to $10 million by next June.

Similarly, the accommodations tax on hotel rooms has decreased.

Greenville typically raises about $11 million from its garages and parking lots downtown but expects just $8 million for the current year.

Reserves used

To make up the gap, the city dipped into its hefty reserve funds to make the payments on bonds issued for Falls Park, built in the early 2000s, and the Swamp Rabbit Trail, which is under construction, and to provide additional support for the Convention Center and the zoo.

Various smaller projects such as replacing Main Street light fixtures, adding LED streetlights and adding sidewalks were postponed.

The city also froze salaries, did not fill about 35 jobs and did not replace vehicles.

McDonough said the next few months will be key as property taxes come due and business licenses are renewed. He said he knows some property owners have deferred rent for the time being. Businesses have closed.

“It is likely to be challenging,” he said.

While McDonough expects the economy to rebound quickly when COVID-19 vaccines become widely available, he says the city’s financial difficulties will linger until 2024.

Recruiting new residents

The data on whether people are fleeing big cities is inconclusive at best, Remington Tonar, chief revenue officer of The Cannon, and Ellis Talton, director of growth at Briq, wrote in a column for Forbes. They cite a number of studies that show both sides, including moving company data and available housing numbers.

The column was focused mainly on the health of big cities, which they deem to be in good shape, saying just because someone left a city doesn’t mean they’re going to stay away once the pandemic is over.

“Understandably, many commentators and pundits have focused on the fate of big cities — the cities they live in. These cities may change, but will probably be just fine. The truth, however, is that small and medium-sized cities and under-the-radar suburbs stand to gain more from small population increases than big cities stand to lose from small population decreases,” Forbes reported.

Also important, the writers argue, is that often people moving from big cities are more educated and bring the sorts of skills Greenville’s manager McDonough says the city is looking for, such as programmers for advanced manufacturing businesses. Advanced manufacturing, or the use of robotics in making products, is an important part of Greenville’s economic development plan to broaden the tax base.

“The digital building blocks are people,” McDonough said.

Greenville is well positioned for attracting new, talented residents, he said, with an entrepreneurial spirit, good climate and available venture capital.

“On so many fronts, Greenville has transformed,” McDonough said.

This story was originally published December 8, 2020 at 10:39 AM.